Sparton Corporation Fourth Quarter and Fiscal Year 2016 Financial Results September 7, 2016
Safe Harbor Statement Certain statements herein constitute forward-looking statements within the meaning of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended. When used herein, words such as “believe,” “expect,” “anticipate,” “project,” “plan,” “estimate,” “will” or “intend” and similar words or expressions as they relate to the Company or its management constitute forward-looking statements. These forward-looking statements reflect our current views with respect to future events and are based on currently available financial, economic and competitive data and our current business plans. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward- looking statements whether as a result of such changes, new information, subsequent events or otherwise. Actual results could vary materially depending on risks and uncertainties that may affect our operations, markets, prices and other factors. Important factors that could cause actual results to differ materially from those forward-looking statements include those contained under the heading of risk factors and in the management’s discussion and analysis contained from time-to-time in the Company’s filings with the Securities and Exchange Commission. When we calculate adjusted earnings per share, adjusted EBITDA and other adjustments to the statements of income, we exclude certain expenses and income, including discrete tax benefits, because we believe that they are not related directly to the underlying performance of our fundamental business operations. We exclude these measures when reviewing financial results and for business planning. Although these events are reflected in our GAAP financial statements, these transactions may limit the comparability of our fundamental operations with prior and future periods. We believe EBITDA and adjusted EBITDA are commonly used by financial analysts and others in the industries in which the Company operates and, thus, provide useful information to investors. The Company does not intend, nor should the reader consider, EBITDA or adjusted EBITDA to be an alternative to operating income, net income, net cash provided by operating activities or any other items calculated in accordance with GAAP. The Company's definition of adjusted EBITDA may not be comparable with other companies. Accordingly, the measurement has limitations depending on its use. 2
Today’s Agenda • Overview of Recent Developments • Fourth Quarter and Fiscal Year 2016 Financial Results Consolidated EBITDA MDS Segment ECP Segment Liquidity & Capital Resources • Other Fourth Quarter Highlights and Outlook • Q & A 3
Overview of Recent Developments • Fourth quarter financial and operating performance • Continued improvement in SG&A footprint • Amendment to Credit Facility • Strong free cash flow in Q4 and FY 2016 • Strengthening pipeline and New Program wins in MDS Segment • Write-off of impaired goodwill in MDS Segment 4
Consolidated Financial Results SELECTED FINANCIAL DATA For the Quarters Ended For the Fiscal Year Ended Q4 FY16 Q3 FY16 Q4 FY15 2016 2015 (Dollars in thousands) Net sales $ 106,967 $ 102,175 $ 126,393 $ 419,362 $ 382,125 Gross profit 21,422 19,067 28,090 80,148 74,814 Gross profit margin 20.0% 18.7% 22.2% 19.1% 19.6% Selling and administrative expenses $ 13,460 $ 13,727 $ 16,220 $ 55,151 $ 46,969 Adjusted selling and administrative expenses (non-GAAP) 12,446 12,605 15,968 51,883 45,647 Adjusted selling and administrative expenses, % of sales (non-GAAP) 11.6% 12.3% 12.6% 12.4% 11.9% Impairment of goodwill $ 64,174 $ - $ - $ 64,174 $ - Operating income (loss) (59,417) 2,676 8,809 (51,789) 17,252 Adjusted operating income (non GAAP) 5,875 3,740 11,604 16,329 21,760 Earnings (loss) per share - diluted (4.30) 0.12 0.51 (3.91) 1.10 Adjusted earnings per share (non GAAP) 0.50 0.34 0.81 1.56 1.74 EBITDA (non-GAAP) (55,594) 6,546 12,398 (36,021) 28,647 Adjusted EBITDA (non GAAP) 10,019 7,865 15,361 33,542 34,307 Adjusted EBITDA margin (non GAAP) 9.4% 7.7% 12.2% 8.0% 9.0% Free cash flow $ 25,953 $ 6,235 $ 1,296 $ 42,034 $ 8,950 5
Adjusted EBITDA (non-GAAP) For the Quarters Ended For the Fiscal Year Ended Q4 FY16 Q3 FY16 Q4 FY15 2016 2015 (Dollars in thousands) Net income (loss) $ (42,081) $ 1,136 $ 5,098 $ (38,283) $ 10,989 Interest expense 1,059 956 894 3,803 2,456 Income taxes (18,437) 612 2,846 (17,216) 3,966 Depreciation and amortization 3,865 3,842 3,560 15,675 11,236 EBITDA (55,594) 6,546 12,398 (36,021) 28,647 Adjustments Impairment of goodwill 64,174 - - 64,174 - Costs related to potential sale of the Company 671 430 - 1,101 - Restructuring charges 164 113 - 3,185 - Stock-based compensation 321 255 167 1,445 1,885 Other nonrecurring adjustments, net 283 521 2,796 (342) 3,775 Total adjustments 65,613 1,319 2,963 69,563 5,660 Adjusted EBITDA $ 10,019 $ 7,865 $ 15,361 $ 33,542 $ 34,307 Adjusted EBITDA margin 9.4% 7.7% 12.2% 8.0% 9.0% 6
Reconciliation of EBITDA For the Quarters Ended For the Fiscal Year Ended Q4 FY16 Q3 FY16 Q4 FY15 2016 2015 EBITDA, before corporate allocations: MDS $ 7,597 $ 5,235 $ 7,244 $ 24,424 $ 25,335 ECP 8,009 8,140 12,027 32,821 29,602 Total segment EBITDA 15,606 13,375 19,271 57,245 54,937 Less: Corporate selling and administrative (7,428) (7,213) (7,077) (30,368) (27,004) Plus: Corporate depreciation 402 384 204 1,276 714 Plus: Stock-based compensation 321 255 167 1,445 1,885 EBITDA before nonrecurring items 8,901 6,801 12,565 29,598 30,532 Nonrecurring items 1,118 1,064 2,796 3,944 3,775 Adjusted EBITDA - CONSOLIDATED $ 10,019 $ 7,865 $ 15,361 $ 33,542 $ 34,307 7
MDS Segment Financial Results SELECTED FINANCIAL DATA For the Quarters Ended For the Fiscal Year Ended Q4 FY16 Q3 FY16 Q4 FY15 2016 2015 (Dollars in thousands) Gross sales $ 72,346 $ 68,187 $ 84,749 $ 282,076 $ 263,940 Intercompany sales (3,627) (3,532) (6,592) (17,028) (17,756) Net sales 68,719 64,655 78,157 265,048 246,184 Gross profit 9,732 7,771 13,094 34,788 36,461 Gross profit margin 14.2% 12.0% 16.8% 13.1% 14.8% Selling and administrative expenses $ 3,155 $ 3,608 $ 6,744 $ 14,621 $ 11,934 Allocation of corporate expenses 2,281 2,242 1,886 9,192 6,681 Total selling and administrative expenses, % of net sales 7.9% 9.0% 11.0% 9.0% 7.6% Amortization of intangible assets 1,879 1,948 1,801 7,938 5,811 Impairment of goodwill 64,174 - - 64,174 - Operating income (loss) $ (61,861) $ 231 $ 2,663 $ (61,813) $ 9,535 Segment EBITDA, excludes corporate allocation and goodwill impairment 7,597 5,235 7,244 24,424 25,335 8
ECP Segment Financial Results SELECTED FINANCIAL DATA For the Quarters Ended For the Fiscal Year Ended Q4 FY16 Q3 FY16 Q4 FY15 2016 2015 (Dollars in thousands) Gross sales: Domestic sonobuoys $ 20,753 $ 19,639 $ 23,159 $ 76,094 $ 81,437 Foreign sonobuoys 5,811 6,313 10,070 25,839 15,298 Engineering 2,764 3,760 4,639 17,358 13,466 Rugged and other 8,934 7,854 10,437 35,268 26,114 Gross sales 38,262 37,566 48,305 154,559 136,315 Intercompany sales (14) (46) (69) (245) (374) Net sales 38,248 37,520 48,236 154,314 135,941 Gross profit 11,690 11,296 14,961 45,360 38,353 Gross profit margin 30.6% 30.1% 31.0% 29.4% 28.2% Selling and administrative expenses $ 3,115 $ 2,837 $ 2,513 $ 11,128 $ 8,107 Allocation of corporate expenses 1,168 1,061 981 4,354 2,931 Total selling and administrative expenses, % of net sales 11.2% 10.4% 7.2% 10.0% 8.1% Amortization of intangible assets $ 390 $ 413 $ 438 $ 1,654 $ 780 Operating income 6,196 6,424 10,286 25,880 25,033 Segment EBITDA, excludes corporate allocation 8,009 8,140 12,027 32,821 29,602 9
Liquidity & Capital Resources Cash Availability 300,000 1.50 Debt-to-EBITDA FY15Q4 FY16Q1 FY16Q2 FY16Q3 FY16Q4 ($ in '000) 275,000 Leverage 1 = 3.0x Cash and equivalents 14,914 2,187 4,830 834 132 Credit Availability* 119,800 135,800 140,700 150,700 76,939 250,000 Total 134,714 137,987 145,530 151,534 77,071 225,000 Net Debt ($ '000) 200,000 1.00 Debt-to-Equity Ratio Debt 175,000 ($ in '000) FY15Q4 FY16Q1 FY16Q2 FY16Q3 FY16Q4 150,000 139,586 Credit Revolver 154,500 138,800 133,800 123,400 97,206 Lease Obligations - - - 604 549 125,000 97,623 100,000 0.50 75,000 Inventory 50,000 ($ in '000) FY15Q4 FY16Q1 FY16Q2 FY16Q3 FY16Q4 32,972 Net Inventory 79,503 86,589 76,717 79,959 77,871 25,000 11,539 Net Inventory Turns 4.8 4.6 4.5 4.4 4.2 1,796 1,669 0 - Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 * As of June 2015, includes Letters of Credit. (1) – As calculated under the Credit Revolver Agreement. 10
Recommend
More recommend
